Why Every Recent High School Graduate Should Open a Roth IRA

If you’re a recent high school graduate—or the parent of one—there’s probably a lot on your mind right now. College, jobs, moving out, maybe even just enjoying that sweet summer break before life gets busier. But there’s one thing that rarely makes the to-do list at this stage of life that absolutely should: opening a Roth IRA.

Yeah, we get it. Retirement sounds like something for your grandparents to worry about. But trust us—starting a Roth IRA now could be one of the smartest, most powerful financial moves a young adult can make. Let’s break it down in plain English and show you why.

First, What Is a Roth IRA?

A Roth IRA (Individual Retirement Account) is a type of investment account that allows your money to grow tax-free. Unlike traditional IRAs or 401(k)s, which give you a tax break upfront and make you pay taxes when you retire, a Roth IRA works in reverse: you pay taxes on the money now, but withdrawals later (in retirement) are completely tax-free.

So why does this matter for high school grads?

You’re Probably in the Lowest Tax Bracket of Your Life

Most recent high school grads work part-time or have summer jobs before starting college or entering the workforce full-time. That means they’re either not earning enough to owe federal income tax or they’re in a very low tax bracket—sometimes as low as 10%.

Because Roth IRAs use after-tax money, this is the ideal time to start one. You’re contributing money that’s already been taxed at a super low rate, locking in that tax rate forever. Think about it: you’re trading a little bit of taxed money now for the chance to never pay taxes on that money again—even when it’s grown into a much bigger amount.

Compound Growth Is Your Best Friend

Let’s say you start contributing $1,000 a year to a Roth IRA at age 18, and you do that for just five years. That’s $5,000 total. Not a crazy amount, right?

But if that $5,000 grows at an average rate of 7% annually—and you don’t touch it—it could be worth over $76,000 by the time you turn 65. That’s the power of compounding: your money earns interest, and then that interest earns more interest. And since it’s a Roth IRA, all that growth is completely tax-free when you withdraw it in retirement.

Now imagine you keep contributing over the years. Starting young could make you a millionaire in retirement—with relatively modest annual contributions.

Flexibility: Roth IRAs Aren’t Just for Retirement

One of the biggest misconceptions about Roth IRAs is that they’re untouchable until you’re 59½. Not true! While it’s smart to leave the money alone as long as possible, there are a few penalty-free and tax-free exceptions that are perfect for young adults:

• College Expenses: You can withdraw your contributions (but not the earnings) at any time, for any reason, tax- and penalty-free. For qualified education expenses, you can also withdraw earnings without the 10% early withdrawal penalty (though they may still be taxed).
• First-Time Home Purchase: You can withdraw up to $10,000 of earnings—tax- and penalty-free—to help buy your first home. That can be a huge help when you’re ready to stop renting.
• Life Happens Fund: Even if you don’t use it for school or a home, just knowing you have a growing, tax-advantaged account you can tap into in an emergency (especially your contributions) is a great peace of mind.

Bottom Line

Starting a Roth IRA as a high school grad is like planting a money tree in your backyard while everyone else is still deciding what seeds to buy. It’s a simple step that takes advantage of your current low tax bracket, gives you access to powerful compounding growth, and offers more flexibility than most people realize.

So if you’ve got earned income—even from a part-time job scooping ice cream or lifeguarding—you’re eligible to contribute. You don’t need thousands of dollars to get started. Many brokerages let you open an account with as little as $50–$100.

Your future self will thank you—big time.

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Check out my recent articles over on Investopedia, “Benefits of starting and IRA for your child” and “Can I use my IRA to buy a house?“